Kellogg cuts year view for Europe, U.S. weakness

MelodieWarner

Kellogg Co.
K, -0.23%
cut its full-year guidance as weak volume growth in certain U.S. categories and its European business contributed to weaker-than-expected first-quarter results.

Shares were off 6.6% at $50.44 premarket as the cereal company said first-quarter earnings were $1 a share, including a 5 cents a share gain from hedges related to its pending $2.7 billion acquisition of Procter & Gamble Co.'s (PG) Pringles business. The per-share amount is flat with the year-earlier period, but sales declined 1.3%. Analysts surveyed by Thomson Reuters were expecting earnings of 99 cents on 3% revenue growth.

The company now expects full-year earnings between $3.18 and $3.30 a share, including the impact of Pringles, on sales growth of 2% to 3%. Kellogg expects the acquisition to lower per-share earnings by 6 cents to 11 cents. Analysts were expecting 2012 earnings of $3.48 on 6% sales growth.

Kellogg--also known for such brands as Pop-Tarts, Rice Krispies and Nutri-Grain--had seen its revenue grow in recent quarters as it raised prices to pass along higher commodity costs. But the company saw a sharp decline in third-quarter earnings as it stepped up investments in its supply chain in an effort to avoid a repeat of two major product recalls in recent years. Kellogg also has plans to spend more on advertising to support product launches.

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